Discussion:How-the-Rich-Cheat-On-Their-Taxes

FYI .... the comments in the article are bias (IMHO).

I would like to see the underlining data.

Is there anyway to obtain the data?

An interesting book (actually two): The Tipping Point, and Made To Stick. There are some interesting parallels with getting people to WANT to buckle seat belts and getting people to WANT to stop littering.

I read the tipping point 2 years ago, perhaps I will try it again.

I didn't see any relationship. I will read it once again.

Matt

As for who cheats the most...I don't really know. I saw just as many low income taxpayers wanting to take wrong deductions or not report income as the high-income taxpayers. However, the high-income taxpayers tended to be a bit more concerned about being caught. I think all of the low-income taxpayers that just plug in their W-2 into TurboTax, certainly skews the numbers in favor of low-income taxpayers cheating less.

About the study, the article states: "The Slemrod/Johns analysis uses unpublished data from special research audits the IRS conducted on a sample of 45,000 individual returns filed for 2001."

I have to wonder if the IRS had some criteria for choosing returns to perform "special research audits" other than the random sampling that would be required to draw conclusions about the entire population of taxpayers. Has this study been peer reviewed? Doesn't seem so. Data can be manipulated to show that the moon is square.

Despite the alleged cheating of higher income taxpayers, they still bear by far the largest share of the Federal Income Tax burden according to the Treasury Department. Why does this fact not carry more weight?

Fact Sheet: Who Pays The Most Individual Income Taxes?

The individual income tax is highly progressive – a small group of higher-income taxpayers pay most of the individual income taxes each year.

   *
     In 2001, the latest year of available data, the top 5 percent of taxpayers paid more than one-half (53.3 percent) of all individual income taxes, but reported roughly one-third (32.0 percent) of income. 
   * The top 1 percent of taxpayers paid 33.9 percent of all individual income taxes in 2001.  This group of taxpayers has paid more than 30 percent of individual income taxes since 1995.  Moreover, since 1990 this group’s tax share has grown faster than their income share.  
   * Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes.  In all years since 1990, taxpayers in this group have paid over 90 percent of all individual income taxes.  In 2000 and 2001, this group paid over 96 percent of the total.   
   * The President’s tax cuts have shifted a larger share of the individual income taxes paid to higher income taxpayers.  In 2004, when most of the tax cut provisions are fully in effect (e.g., lower tax rates, the $1,000 child credit, marriage penalty relief), the projected tax share for lower-income taxpayers will fall, while the tax share for higher-income taxpayers will rise.   
   * The share of taxes paid by the bottom 50 percent of taxpayers will fall from 4.1 percent to 3.6 percent.  
   * The share of taxes paid by the top 1 percent of taxpayers will rise from 30.5 percent to 32.3 percent. 
   * The average tax rate for the bottom 50 percent of taxpayers falls by 16 percent as compared to a 12 percent decline for taxpayers in the top 1 percent. 

Source: http://www.ustreas.gov/press/releases/js1287.htm

One thing is clear: The lowest income group pays the highest dollar amount of cigarette tax, but there doesn't seem to be much concern about that.

I zeroed in more on this statement: "The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains."

I suspect if you put a couple Son of Boss investors into the mix, the percentage among the higher incomes would go up more, but what does not compute is the fact that people with incomes in excess of 500K would generally employ professionals to do their taxes. As we know, IRS has never been able to come up with a method to track the K-1s, so the absence of a K-1 might never be found, but why would any professional nudge and wink their way around that. I would hate to think there are tax people out there who would countenance omitting income, or exaggerating deductions.

And Kevin, I would add to that WANT to slow down (while driving). I'm sure there are many other things that could be added.

http://taxprof.typepad.com/taxprof_blog/2008/10/stanford-sympos.html

I didn't know that sucking up to the rich was a part of the job description for a tax preparer. Can't the rich take care of themselves? It's not my job to apologize for them.

Is there any room at the Inn for the poor people? You know, they are all drug dealers anyway. Oh, I know, we'll put them in the Stable.

And, these are audits on the Scd. C's grossing 100K and less. If they can ever get the staff experience to audit these LLC's. Oh Lord. The professor will have stuff to write about the rest of his career. lol.

If I'm wrong about the Scd. C rate, I'm sure someone will correct me, but it's a lot higher than the other entities.

Office Examiners, for the most part, come with pre-conceived notions and since they are sitting at their cozy desk, surrounded by photos of their loved ones, would rarely be able to put side their ideas. "You can't do that," was a common comment, and since the rep did not have access to code, regulations, rulings etc on hand, the answer had to wait until he returned to his office....not that the Examiner learned anything from it.

As for the top 1% or 5% paying most of the taxes? Well they have most of the income too!